Posted on Friday 25 June 2021
If you feel like saving money each month is a struggle, you’re certainly not alone. It’s a problem across the board for many Canadians: nearly 40 percent say they don’t have enough savings to withstand a financial emergency.
Setting money aside is hard, especially when you’re counting down the days from one paycheque to the next. And when money is tight, putting money in a savings account is the last thing on your mind!
But having a savings account is a crucial part of your personal finances – not just for your financial future, but for your financial present. Surviving a financial crisis (like losing a job, needing a new car, or even a pandemic) means having a solid savings plan in place. Even without a financial crisis, savings is what will help you purchase a home, travel, and with any luck, retire comfortably.
The challenge is getting past the hesitation (or fear) of saving. For many Canadians, that means finding creative ways to automate their savings. While saving money means that you’re decreasing the funds available to you today, having financial peace of mind tomorrow is a payoff that is more than worth it.
How do you get past that hesitation? Automating your savings eliminates many hurdles that can be difficult – or even impossible – to overcome. With an automated savings plan, the stress and anxiety that typically comes with saving is eliminated. There is no second guessing over whether you should put that extra money away (or whether you should put it towards a weekend out with friends instead).
There also isn’t an opportunity to forget to save, which is an all-too common struggle for many. Over time, this means you can actually end up saving more money with an automated savings plan than you would otherwise!
Can you automate your savings? Absolutely. What’s the best way to start? Keep reading: automating your savings is easier than you think! In the sections below, we’ll tell you everything you need to know about turning your savings into a seamless, automatic, and painless process.
A great way to automate your savings is to set up recurring deposits. Talk to your bank and see if they offer an automated transfer program. Many banks offer automated transfers from your checking account to your savings account, making it easy to save without even lifting a finger.
Choose a dollar amount that works best for you and for your financial goals. And instead of having one big monthly transfer, break it into smaller pieces to create a more manageable savings plan.
For example, instead of setting an automatic transfer of $200 each month, you can create a weekly $50 transfer. It might feel like a big change at first, but over time, seeing those automatic transfers on your bank statement will become second nature.
Some banks even provide automated savings programs that are based on your debit card usage. For example, the Simply Save program at TD lets you decide on a dollar amount to transfer each time you use your debit card (anywhere between $0.50 to $5.00). If you use your debit card often, this could be a great way to supplement your monthly recurring transfers!
Pro tip: the type of savings account that you choose can have a big impact on your savings success. If you’re creating an emergency fund, keeping your savings in a basic account helps ensure that you can have quick access to funds when you need them. If you’re saving for the long-term and want your money to grow over time, however, you should consider a high-yield savings account or a retirement account.
If you get paid via direct deposit, ask your employer if you have the option to split your paycheque into your checking and your savings account. Don’t panic – this doesn’t mean that you have to split your paycheque right down the middle!
If your employer offers this option, you can create an automated savings plan by designating a portion of your paycheque to savings. Choose an amount that you can reasonably put away each month without cutting into your bills or other financial obligations.
For example, if you get paid $3,000 each month, you might ask to send 10 percent of your paycheque into savings. If that feels too aggressive, start small and work your way up to a higher percentage! Every dollar counts, and even saving $50 a month can make a big difference over time.
Splitting your direct deposit is ideal because it takes you – and any emotion or anxiety with saving – out of the equation. First, you’ll eliminate the possibility that you might forget to save on your own. Second, this means that your savings never hits your checking account, which is good news for those prone to spontaneous spending.
Savings apps are all about finding new, innovative ways to promote better savings habits. Many savings apps are available free of charge (or at a minimal cost) and offer extra functionality, like budgeting tips and tools.
Moka takes the spare change from all of your purchases and payments and sends it to your investment portfolio. Once you’ve linked your debit or credit card, the app will round up to the nearest dollar and use that difference to invest on your behalf.
Let’s say that you buy a coffee and it comes to $5.25. Moka rounds your charge up to an even $6.00, and takes the extra $0.75 and invests it for you. It’s simple, straightforward, and with minimal amounts, you’ll never notice the difference!
If you upgrade to their 360 plan, the app will even help you analyze your credit card debt and come up with a personalized savings plan to become debt-free. While an app like Moka will cost a monthly membership of $3 or $15 (depending on your selected plan), the cost is minimal compared to what you can save over time.
Whether you want to build your emergency fund, pay off debt, or start planning for retirement, learning how to save money is a crucial first step. Automating your savings plan will not only make it easy to save, but it will also keep you out of your own way when it comes to reaching your financial goals.